One of the most pressing items facing the oil sector heading into 2014 is the ongoing turmoil in Libya. Civil unrest and labor strikes have resulted in severe supply disruptions there. This is causing headaches for the global oil majors that have significant operations in North Africa.

Some oil majors have more to lose than others from deteriorating business conditions in Libya. In particular, two European majors have plowed huge resources into production and development in Libya and the rest of Africa. Here's why Libya matters to the global oil super-majors, and which companies stand to be hit the hardest.

Why European oil majors may regret investing in North Africa
Since July, the ongoing supply disruptions in Libya have gone from bad to worse. Production from the country reached 1.4 million barrels per day back in July, but has since fallen to 250,000 barrels per day. That's resulted in a greater than $7 billion loss for Libya, which will likely reverberate through to oil majors that have made Libyan oil production a strategic priority.

Specifically, Eni (E 1.03%) and Total (TTE 1.53%) should be watched closely, as they've both put huge efforts into their North African operations. Eni has more operations in Libya than any other oil driller in the world. Consider that 34% of Eni's third-quarter production came from North Africa alone. Total production in North Africa fell 4% on a quarter-over-quarter basis. Eni's investment in Libya itself is considerable as the company is committed to spending $8 billion there over the next decade.

Meanwhile, Africa now accounts for Total's biggest geography in terms of gross capital expenditure and oil and gas production, as well as its second-biggest in terms of number of service stations. To be exact, Total has more than 7 billion euros in gross capital expenditure plans for Africa, far ahead of its next largest geographical area of investment, which is Europe, at just under 6 billion euros. Furthermore, Total produces 713,000 barrels of oil equivalent per day in Africa.

One U.S.-based oil major is switching focus
While Eni and Total flounder under the weight of production woes out of North Africa, ConocoPhillips (COP 1.75%) isn't waiting around for conditions to improve. ConocoPhillips has sold $3.5 billion worth of interests in Nigeria and Algeria, placing future emphasis on its booming North American fields instead. ConocoPhillips was forced to lower its output forecast for the remainder of the year in direct response to difficulties in its Libyan operations, so its rationale is entirely understandable.

It simply didn't make sense for ConocoPhillips to continue its efforts in such high-risk geographies, when equally promising plays exist much closer to home. ConocoPhillips saw Libyan production fall by 28,000 barrels per day in the third quarter. While the company still expects to produce 50,000 barrels per day there in the fourth quarter, that remains to be seen.

ConocoPhillips' 2014 capital expenditures budget calls for $16.7 billion in spending, 55% of which will be allocated to North America. The bulk of the remaining 45% will be deployed in Europe and Asia Pacific. Major projects in the United States include the Eagle Ford, Bakken, and Permian Basin fields which have proven to be hugely successful drilling programs.

Closely monitor the situation in Libya
Labor strikes that have severely disrupted oil and gas supplies from Libya began this summer, but have not subsided since. That's meant a good deal of pain for the global oil majors reliant on North Africa to fuel production. Eni and Total placed their bets on Libya and other high-risk geographies in North Africa but may now regret their decisions.

ConocoPhillips, meanwhile, is selling off assets in Africa and, instead, will focus on domestic production next year. This sets up ConocoPhillips to outperform in 2014, as it will reap the benefits of strong growth in domestic oil and gas production without the headaches of operating in risky geographies. As a result, Eni and Total investors should closely monitor the developments out of Libya in the quarters ahead.

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